The German index tried to rally on Wednesday but fell apart fairly quick.
DAX
The German index rallied initially on Wednesday to show signs of strength, but we have turned around to show signs of trouble as well. That being said, I think you have got a situation where traders are looking at this through the prism of what is going to happen with energy in the European Union.
That is going to be a major problem I believe and with that being the case, it is interesting to see that traders are still a bit cautious. So, with that being said, it is worth noting that the 200-day EMA has offered resistance at the 24,000 Euro region.
Energy Supply Constraints
But if we fall from here, the 23,000 Euro level is an area that I think will continue to offer support. If we were to break down below there, then we could go looking to the 21,000 Euro level. To break above the 24,250 Euro level then it opens up a move to the 25,000 Euro level.
I think this literally will come down to risk appetite and whether or not energy ends up in Europe because quite frankly the European Union now has an issue where natural gas is not coming from Qatar and oil of course has been greatly influenced by the Strait of Hormuz closing down. This is why you see so much more weakness in Europe and in the European Union than you do in North America.
Especially for example the Toronto Stock Exchange has been really strong, and the US stock exchange has been sideways in general depending on the index you look at. While all of this has been going on, this shows the inherent weakness in the European Union.
I do not necessarily want to short this market, but I am watching this 23,000 level in case it breaks down. To the upside the 25,000 Euro level would of course be a barrier. So, a drop and a bounce might be a short-term buying opportunity if you are nimble but recognize that there are a lot of headwinds for Europe right now.